UK interest rates expected to be held at 5.25% – BBC News

Analysts also said rates are unlikely to be cut because of services inflation, which reflects prices for cinema tickets, restaurant meals and holidays, remaining higher than expected.

Higher interest rates has meant the cost of borrowing money has increased for things such as mortgages, credit cards and loans, however, returns on savings have risen.

The theory behind rising rates is that it will slow inflation, but it can also drag on economic growth as businesses may put off investment or hiring, which could mean less jobs being created.

Last month, the governor of the Bank of England Andrew Bailey said policymakers needed to “see more evidence” that price rises have slowed further before cutting interest rates, but that he was “optimistic”.

Paul Broadhead, the Building Society Association’s (BSA) head of mortgage and housing policy, said rates being left unchanged would come as a “disappointment” to mortgage holders and would-be borrowers.

“A cut would have provided a little much-needed optimism to homeowners and first-time buyers,” he added.

According to data from the BSA released on Thursday, more than half of people surveyed think the deposit required to buy a home is too high. For first time buyers, the figure is two-thirds.

The average first-time buyer needs a household income of more than £60,000 to get onto the property ladder, according to data from Zoopla on Thursday.

Both the Labour Party and the Conservatives have each accused the other of failing to match promises on housing which, in turn, would raise costs for home buyers or renters.

The Conservatives said they were offering a better deal on stamp duty, by permanently abolishing the levy for first-time buyers purchasing properties up to £425,000.

However, analysts say stamp duty is primarily paid by those buying larger homes, or in more expensive areas. Potential savings would not benefit everyone, as some would not need to pay anyway.

Meanwhile, Labour said its more ambitious plans for energy efficiency in rental homes would protect tenants from higher energy bills.

Questions remain on whether their proposals would be achievable, following concerns raised by charities over the quality of insulation fittings under government schemes.

Interest first started being hiked from near zero in 2021 as prices starting to rise quickly after Covid lockdowns ended as demand for goods and services soared.

Energy prices then rocketed following Russia’s invasion of Ukraine, which drove inflation to a 40-year-high of 11.1% in October 2022.